EXECUTIVE SUMMARY

EXECUTIVE SUMMARY
EXECUTIVE SUMMARY
As countries around the world continue their efforts
to rebound from the 2008 economic crisis and
the “great collapse” of international trade in 2009,
some regions, including Asia and the Pacific, are
faring better than others. A global decrease in
consumption has caused a prolonged slump in
trade growth in exporting countries of the region,
especially in manufactured goods. Economic
uncertainty in the United States and the European
Union is continuing to affect countries worldwide in
the areas of trade, investment and labour mobility.
After the initial promising signals of a recovery in
2010, exports from Asia and the Pacific are again
Figure 1. Subdued prospects for export growth
(Percentage)
The Asia-Pacific Trade and Investment Report
(APTIR) 2012 describes these trends and analyses
recent developments in intraregional and
interregional trade, investment, trade facilitation and
integration initiatives since 2011, as summarized
below.
19
15
11
7
3
-1
facing a risk of deceleration. The intensified
pressure in the euro zone and the rising threat from
a slowdown in the emerging economies has raised
the fear of a re-emergence of the global crisis. As
a result, trade is not expected to quickly recover in
2013 after the set-backs experienced in 2011 and
2012 (figure 1). The growth of goods exports in
developing Asia and the Pacific, in real terms, is
expected to drop from 6.5% in 2011 to 2% in 2012,
while import growth is projected to fall from 9% to
3% during the same period. Exports are projected
to further weaken in 2013 in India, the Philippines
and Turkey, while import growth is expected to
remain stalled during 2013 in Australia and Japan
(among the Asian developed countries) and in
Indonesia and the Philippines (among the
developing countries of the region).
2008
2009
2010
2011
2012
2013
-5
-9
-13
Developing Asia-Pacifica
All Asia-Pacifica
All developing countries and CISb
Sources: ESCAP.
a
Based on the Oxford Economic Forecast Model for Asia and
Pacific countries.
b
Based on World Trade Organization, press release
No. PRESS/676/Rev. 1*, 24 September 2012, for all developing
countries and the Commonwealth of Independent States.
1.
PROSPECTS OF FULL RECOVERY
DAMPENED BY CONTAGION RISK
The slowdown of the Chinese economy is affecting
the Asia-Pacific region’s intraregional exports in
goods. The weakening of China’s demand for
intermediate inputs will mainly affect developing
economies in East and North-East Asia, and SouthEast Asia, while a contraction of the demand for raw
materials will have adverse impacts on exports from
South-East, North and Central Asia. Australia,
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ASIA-PACIFIC TRADE AND INVESTMENT REPORT 2012
Indonesia, the Republic of Korea and Taiwan
Province of China are already experiencing the
impact of weakening demand from China, thus
adding pressure to already lethargic demand from
the rest of the world; this situation has resulted in
even lower export growth figures than those that
were forecast in the APTIR update issued in March
2012. In short, the region’s exports of raw materials
and intermediate goods, such as rubber products,
electronics, plastics and chemicals, will potentially
suffer from both a softening of demand in China and
from weak global markets.
agricultural and industrial products. The region as a
whole, and especially China, the Republic of Korea,
Turkey, and Hong Kong, China, are prominently
involved in promoting the use of waste as a resource
and input in production (box 1.1. in chapter 1).
However, greater attention will have to be given
to the greening of production in the region (and
granting more liberal market access for green
products and services within the region as suggested
in box 5.1 in chapter 5) in order to reduce reliance
on non-renewable sources of energy, yet enable the
growth needed for inclusive development.
How economies of the region will react to this
continued weakening of external demand for their
exports will determine the speed and quality of full
recovery and growth in the region. One option,
especially for countries already part of the networks
of global and regional value chains, would be to
promote product and market diversification more
aggressively with a view to exploiting non-traditional
market potential, and introducing new export products
(an inability to improve export diversification
appears to be chronic in South Asia, as explained in
box 1.2 in chapter 1). From the analyses of the level
and patterns of intra-subregional trade, there is
an apparent need to learn more about import
demand within a given subregion and – even more
importantly – about obstacles preventing sourcing
goods, services and resources from within the
subregion in order to enhance trade prospects
for all. Amid global uncertainties, competition in
emerging economies will be fierce. Therefore,
continued reforms to achieve greater efficiency,
subject to the principles of sustainable growth, are
needed. In addition, broadening and strengthening
regional economic cooperation will be necessary to
increase intraregional trade.
2.
Initiatives to shift demand for fossil fuels to
alternative sources have led to an increase in
exports of animal and vegetable oil from the region
by more than 30%, as these commodities are
primary inputs for biofuel production. Crude
materials and chemical products, backed by
favourable price changes, are gaining a larger
share of exports from the region at the cost of both
xviii
SERVICES EXPORTS CONTINUE
TEPID RECOVERY
Exports and imports of commercial services in the
Asia-Pacific region have played an important role in
the recovery of the world economy. China and India,
in particular, experienced significant services export
growth rates in 2010, which assisted in stabilizing
the region. However, exports of commercial
services slowed in many previously dynamicgrowing service exporters in 2011, such as China,
Indonesia, India and Singapore. Higher growth that
was recorded for countries such as Tajikistan,
Kyrgyzstan, Uzbekistan and Nepal can mainly be
attributed to the tripling of travel services traded.
That growth also contributed to maintaining an
overall upward trend in exports of commercial
services across Asia. Despite the fact that the
region’s exports of services have grown faster than
imports since 2003, the Asia-Pacific region still has
a deficit in services trade with the world.
One sector in particular that has contributed to the
expansion of commercial services in the region is
travel services; this services sector is enjoying
dynamic growth and appears to be contributing
towards the expansion of intraregional trade in Asia
due largely to demand in the region for these
services. Of the world’s 10 largest exporters of
travel services, eight are in Asia-Pacific, 1 with
Macao, China, earning about $39 billion in 2011,
surpassing Australia to become fourth-ranked.
1
Counting the European Union (27) as one.
EXECUTIVE SUMMARY
Imports of commercial services in 2011 remained
strong across the Asia-Pacific region. Robust
imports of commercial services are associated with
the “Factory Asia” phenomenon, which requires an
efficient services sector to enable effective
integration of the region’s businesses into global
and regional production networks. In that context, it
is important to reduce entry barriers to the services
sector, particularly for small and medium-sized
enterprises (SMEs), and to provide these
enterprises with opportunities to expand their
international trade. For example, in India, SMEs
have begun to focus on the development of
workers’ skills in the legal counselling and healthcare sectors. India currently has the opportunity
to use its IT skills in diversified sectors, creating
a backbone for its thriving economy (box 2.1 in
chapter 2).
3.
RESILIENT FOREIGN DIRECT
INVESTMENT
Stable growth in foreign direct investment (FDI) in
the region during the past two years has allowed
the Asia-Pacific region to recover from the sharp
fall in FDI inflows caused by the global financial
crisis and to exceed the pre-crisis inflow peak
experienced in 2008.
The region as a whole, including developed
countries, attracted 33% of global FDI inflows in
2011, a considerable increase from its 18% share in
2005. China is the largest recipient of global FDI
flows. In the first half of 2012, it surpassed the
United States to become the largest destination for
global FDI inflows. In 2011, China attracted 25% of
total FDI inflows to the region.
Greenfield FDI remains the main FDI type,
accounting for about three quarters of total FDI in
the region. The coal, oil and natural gas sectors
attract most greenfield investments, followed by the
metals and the automotive original equipment
manufacturing (OEM) sectors. During 2009-2011,
China attracted more than 27% of all intraregional
greenfield FDI, followed by Viet Nam and India with
shares of 11.5% and 10.6%, respectively.
Following the strengthening of regional and global
value chains in the region, and with rising levels of
regional integration, the importance of intraregional
FDI flows has increased. Developing economies of
Asia and the Pacific are emerging as key sources of
FDI in the region, complementing investments from
developed countries that have traditionally been the
main sources.
Despite the relatively positive outlook, the revival of
FDI inflows to the region could be derailed by any,
or all, of three threats – a deepening recession in
Europe, volatile capital flows, or a marked economic
slowdown in China or India – and a shift to more
protectionist policies in reaction to these threats.
The region has generated positive lessons with
regard to policies to improve the investment climate,
including those which have increased the
availability of human capital, thus making the region
more attractive as an investment destination (see
the example of Malaysia in chapter 3).
4.
REGIONAL TRADE FACILITATION
INITIATIVES NECESSARY TO
REDUCING PERSISTENT HIGH
TRADE COSTS
The economies of the Asia-Pacific region are still
better connected with markets in Europe and North
America than with each other. With cumbersome
border procedures, sometimes requiring literally
hundreds of approval documents, for many
countries in the region it is very often much easier
(i.e. cheaper) to trade with Europe or other
developed countries than with other countries in the
region. The costs of regulatory procedures and
meeting documentary requirements have been
estimated to account for between 7% and 10% of
the costs of the goods traded; however, with proper
streamlining of policies, the potential savings could
be in excess of $300 billion annually for the region
as a whole.
Trade facilitation activities include reducing the time
and cost of trade imports and exports, and
enhancing the predictability of trade transactions
through improvements in logistics performance.
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ASIA-PACIFIC TRADE AND INVESTMENT REPORT 2012
Although some countries in the ESCAP region have
made significant progress in streamlining
procedures and implementing paperless trade
systems (see box below), trade procedures in some
developing countries remain very inefficient. As a
result, the average time required to complete trade
procedures in the region still stands at three times
the OECD average. The cost of conducting
intraregional trade in goods in Asia and the Pacific
remains particularly high, with intraregional trade
costs among Central Asian countries up to five
times higher than those prevailing among European
Union countries.
ESCAP resolution 68/3 on “Enabling paperless
trade for trade facilitation”
As many countries in the region work towards the
development of national single window systems for
trade facilitation, the need to exchange electronic
data across borders has become more important. In
this context, the ESCAP member countries adopted
ESCAP resolution 68/3 on “Enabling paperless trade
and the cross-border recognition of electronic
data and documents for inclusive and sustainable
intraregional trade facilitation” at the sixty-eighth
session of the Commission in May 2012. Among the
issues addressed, the resolution invited ESCAP
member countries to work towards the development
of regional arrangements on the facilitation of crossborder paperless trade. Accordingly, the ESCAP
secretariat was requested to facilitate the process,
and to continue and further strengthen its support for
capacity-building activities related to trade facilitation
and paperless trade.
At the same time, however, many of the already
good performers in trade facilitation have made
further progress. For example, China, the Republic
of Korea, Singapore and Hong Kong, China,
generally improved the reliability of their trade
transactions by improving the “timeliness” of arrival
of international shipments, an important dimension
of the Logistics Performance Index (LPI). Of the
landlocked countries, Mongolia has made
substantial progress in this dimension, although its
overall logistics performance and ranking remained
generally unchanged between 2007 and 2012.
xx
5.
PROTECTIONISTS RISKS STILL
ALIVE
It is generally accepted that countries worldwide
successfully managed to avoid tariff wars during the
recent crisis compared with the crisis of the 1930s.
However, tariff increases have accounted for an
important share of protectionism, both regionally
and globally. Based on the Global Trade Alert (GTA)
database,2 tariffs have accounted for 14% of total
protectionist measures implemented since 2010
in the Asia-Pacific region, compared with 11.2% for
the rest of the world. The reason why the tariff
increases have not raised retaliation in the form of
reactive mercantilist actions is that the original
measures were implemented within the secured
“policy space” of the World Trade Organization
(WTO) members. In other words, all tariff increases
were legally permitted under WTO trading rules as
long as they did not exceed the agreed ceilings. The
same argument can be applied to trade defence
measures, implementation of which is allowed and
regulated within the WTO framework and, therefore,
not considered a form of “illegal” protectionism.
However, despite the fact that these measures
conform to multilateral trade rules, they still
introduced considerable “noise” in the global trading
system (figure 2). Since 2010, the Asian and Pacific
region has contributed 42.5% of the discriminatory
measures implemented globally. The lack of
economic revival in most developed economies as
well as financing difficulties in emerging economies
have provided fertile ground for the growth of
protectionist actions, affecting not only merchandise
trade but also services trade, the movement of
people (including service providers) and capital
flows.
After declining from its peak in the first quarter of
2009, the ratio of discriminatory to liberalizing
measures increased again in 2011, both globally
and regionally. This trend is likely related to the
recent slowdown of the global economy, reflecting
2
The GTA database is coordinated by the Centre for
Economic Policy Research, an independent academic and
policy research think-tank.
EXECUTIVE SUMMARY
Figure 2. Less-transparent protectionist barriers implemented in
the Asia-Pacific region, 2010-2012
Source: Figure 5.10 in chapter 5.
the linkage between higher GDP growth rates and
smaller ratios of discriminatory-to-liberalizing
measures for Asia-Pacific countries.
6.
PREFERENTIAL TRADE POLICIES
AND AGREEMENTS
It appears that the global economic crisis of
2008-2009 has not derailed the use of preferential
trade agreements (PTAs) by Governments to
secure access to foreign markets and protect
domestic markets. The total number of agreements
associated with economies of the Asia-Pacific
region is estimated to be well above 230, of which
147 are in force while the remainder are at various
stages of negotiations or consideration.3 The majority
of PTAs are associated with developing countries of
the region, but it must be noted that some of them
also include high-income OECD members.
There is great variability in coverage of exports and
imports by PTAs for developing economies of Asia
and the Pacific. While averages hide important
3
Asia-Pacific Trade and Investment Database (APTIAD),
accessed 1 November 2012.
specifics, at one end of the spectrum there is Brunei
Darussalam, which directs almost 100% of its
exports to its PTA partners. In general, South-East
Asia has been able to build linkages and connectivity
towards increasing levels of economic integration.
At the other end of the spectrum are Pacific island
countries that manage to direct less than 10% of
their exports to PTA partners (including to Australia
and New Zealand), while only 16% of exports from
North and Central Asia is directed to PTA partners.
Because of the growing number of agreements that
frequently comprise the same membership but
different negotiated terms for trade, it is more likely
that the negative effect of the so-called “noodle
bowl” phenomenon will become prevalent, thereby
increasing the costs of trade within the region as
well as reducing opportunities for new trade and
investment. ESCAP has made strong recommendations to Governments to consider rationalization
and consolidation of PTAs. Recently two specific
initiatives have been undertaken (see table below)
with regard to consolidation: (a) the Trans-Pacific
Partnership (TPP), led by the United States, and
(b) the Regional Comprehensive Economic
Partnership (RCEP), led by ASEAN and its partners.
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ASIA-PACIFIC TRADE AND INVESTMENT REPORT 2012
Rising giants – TPP and RCEP
Members of:
Only TPP
TPP and RCEP
RCEP and
potentially TPP
RCEP only
EU27
World
GDP
current
prices
($ billion)
Population
(million
persons)
Exports
($ billion)
Imports
($ billion)
Exports to Exports to
a
TPP
RCEP
%
%
Imports
Imports
b
from TPP from RCEP
%
%
18 874
2 327
508
137
2 197
918
3 173
823
55.2
44.7
22.3
62.0
45.8
45.8
33.1
52.0
7 544
360
1 655
1 670
39.1
46.4
37.2
44.1
9 893
17 578
69 660
2 880
504
6 974
2 410
5 824
15 246
2 267
5 959
16 338
41.1
12.0
29.3
27.4
8.6
22.1
43.5
11.4
29.1
36.6
14.1
30.0
Source: Table 6.5 in chapter 6.
Notes: a and b Exports to and imports from TPP include exports to and imports from current and potential TPP members.
The TPP agreement builds on the Trans-Pacific
Strategic Economic Partnership Agreement (P4)
between Brunei Darussalam, Chile, New Zealand
and Singapore, which entered into force in 2006.
The new initiative aims to be a comprehensive and
ambitious agreement that enhances trade and
investment, and promotes innovation, economic
growth and development among its members.
Although not without its critics, TPP goes beyond an
ordinary PTA and covers areas such as government
procurement; it also aims to include high labour,
environmental and intellectual property standards –
commitments with which many developing countries
would have difficulty complying. Even so, some tobe-RCEP members have already joined TPP
negotiations (Australia, Brunei Darussalam,
Malaysia, New Zealand, Singapore and Viet Nam).
Some other RCEP members have expressed
an interest in joining TPP, including Japan, the
Philippines, the Republic of Korea and Thailand.
RCEP aims to protect the centrality of ASEAN
and is viewed as a counterbalance to TPP. The
architecture of RCEP could possibly turn this
partnership into a bloc with high trade potential for
xxii
those countries participating in the East Asian
production networks centred on China as well as for
Asian countries that depend heavily on intraregional
markets for their exports and imports. Unlike TPP,
RCEP includes China, which (as discussed in
chapters 1 to 3 of this report) is a major trading and
economic partner of most RCEP members. The
“Rising giants – TPP and RCEP” table above
summarizes the current trade orientation for the
possible configurations of membership in the two
blocs. Based on 2011 shares of trade with each
bloc, countries that are parties in both blocs may
find that RCEP offers a larger trade opportunity than
TPP. Similar patterns are found for other potential
RCEP members with the exception of countries that
rely less on intraregional demand than on
extraregional demand for their exports. However,
even those countries may benefit from RCEP as
they may reduce their costs of imported inputs
currently sourced from East Asian neighbours.
While differences between the two initiatives are
significant, both are supposed to result in
rationalized and consolidated trade rules for its
members, a welcome change from the current
preferential trade policy of many countries.